The oldest human activity in the Salt River Valley is agriculture. But the second oldest, in the era since American settlement began in the late 1860s, is land: platting, subdividing, buying, selling, flipping. It's an old-fashioned extraction industry. The remarkable thing is that it remains Phoenix's economic foundation.
With the 1851 Salt and Gila River Meridian, or "baseline," located near today's Phoenix International Raceway, the Americans set in place the point from which land would be surveyed and divided. This is a historic method of American empire, going back to the Northwest Ordinance of 1787. It laid down a template that organized and regularized land to make it fungible.
Initially, the land was divided into farms, the square-mile layout that remains the bones of Phoenix until one gets into the mountains. But as the towns of Phoenix, Tempe, Mesa, Glendale and others grew, increasing amounts were subdivided for houses and businesses. Phoenix's unique location in one of the world's richest river valleys made agriculture a natural source of wealth. But so was the land itself. The 1877 Desert Lands Act expanded the Homestead Act, not only attracting settlers but also speculators.
Virtually every early Phoenician of note engaged in accumulating and speculating in land. One reason Jack Swilling didn't stay in Phoenix, aside from his restless personality, was that once the townsite was established further west, it made his property worth less. Dwight Heard's wide-ranging business ventures were based on his land holdings. Kemper Marley made his fortune in booze and land. Why did Harry and Newton Rosenszweig build their posh towers so far north in Midtown? It was the original family homestead from the 19th century.
Almost every old Phoenician has stories of family or, more likely, acquaintances, who picked up property in what became Paradise Valley or north Scottsdale for $1.50 an acre or some amazing bargain. Or didn't and rued their foolishness (my family falls into this camp).
From the early days of the city, the "if you build it, they will come" mentality prevailed. But it often failed to meet the aspirations. For example, the University Addition north of Van Buren Street and west of Seventh Avenue was predicated on the Methodist Church establishing an institution of higher education there. Handsome bungalows were built, some of which survive. But the university never materialized. It makes for a fascinating "what if." After all, the Methodists also founded what became the University of Southern California in 1880. As in Phoenix, land was donated. Unlike Phoenix, USC had some wealthy patrons.
The landowners and speculators were not deterred. Phoenix was small, isolated, lacking a port or populous hinterland for which it could be a major distribution center. What it did have, besides such rich soil, was land — and gradual and increasing population growth that made it ever more valuable.
That value was ensured and enhanced by the federal government, and later through state and local governmental policy. From the Army clearing the Apache and Washington pushing back the boundaries of today's Salt River Pima-Maricopa Indian Community, to the great water projects, flood control and freeways — it all dictated which land would become valuable and when.
Fraud was a longstanding problem. Racism was played out in who could buy and accumulate property and where. This played out most notoriously in the 1921 Alien Land Law, specifically aimed at preventing Japanese from owning property (they had proved to be highly skilled farmers and Anglos resented their success). African-Americans and Mexican-Americans being denied the right to buy land north of Van Buren (and sometimes south) built in a lack of intergenerational wealth. Despite this, a few black real-estate entrepreneurs worked to develop land in early Phoenix.
Much of this is common to most Western cities. What is remarkable is how difficult it was for Phoenix to make the transition from the old extraction economy — in this case, land — to something else.
Some leaders in the 1940s recognized the problem, but most of the Phoenix business community was lulled into complacency by wartime expenditures here, which had goosed a manufacturing sector. Other cities had postwar transition plans; Phoenix didn't. When the airfields and defense plants closed, they were sandbagged. Slowly, led by lawyer Frank Snell, Phoenix embarked on a more aggressive effort to create an economy that went beyond agriculture, land and tourism.
They succeeded in no small measure from Cold War defense funding, as well as the good luck of Motorola deciding to locate plants here. Other major companies followed, or reopened shuttered war plants, including Sperry, AiResearch and General Electric. Phoenix also boasted a large air-conditioning manufacturing base. These were heralded as "clean industries" and complemented the huge population growth of the late 1950s and into the 1960s. When Greyhound moved its headquarters from Chicago to Midtown Phoenix, it was seen as the first of a Fortune 500 exodus from back east. By the 1970s, Phoenix was a "normal" city in that a wider economy, as well as population growth, drove the real-estate industry.
To be sure, this went along with postwar suburbanization, pioneered in Phoenix by John F. Long's Maryvale. Mass-produced housing, fueled by FHA and VA loans (for Anglos, at least) was a powerful part of the economy even then. So was Arizona as a place where people would buy a house to retire. But it was not the economy.
The importance of this was painfully underscored by the S&L crash and resulting recession in 1990, when city and state leaders embarked on economic development strategies to move beyond the dependence on land. For example, there was the cluster strategy and birth of such organizations as the Greater Phoenix Economic Council.
And yet, for a variety of complex reasons, a truly big-city economy never took hold.
Why? The old stewards died off and the major headquarters companies were bought or, in the case of Arizona Public Service, drastically downsized. Legacy tech companies dwindled — this was especially the case with Motorola — and the remains, even Intel, are not enough to sustain the job needs of such a large metro. New technologies didn't nest in Phoenix. Economic-development efforts faltered. It was easy to go for lower-wage call centers or Amazon warehouses. Phoenix couldn't compete against, say, Austin, for the headwaters and high-paid jobs of the new economy. Few new companies were started and grown for a metro this size.
Most of all, as Ioanna Morfessis, president of GPEC in its best years, said, "We were drunk on growth." Population growth, housing starts, office "parks," tilt-up spec commercial space, big boxes, and shopping strips were mistaken for high-quality economic success.
This Ponzi scheme finally crashed and burned in the Great Recession.
And yet, there's no realistic plan to transition to the economy necessary for the nation's sixth-largest city. There's land. More land than brains, as I wrote when I was a columnist at the Arizona Republic. Almost the entire economic, political, legal and "thought" infrastructure of the metropolitan area and state remained yoked to it. That's why the region is still building freeways — to make land valuable for connected speculators. Why a "Sun Corridor" stretching ever longer beyond Phoenix and Tucson is seen as a good thing.
Thus, there's the Price Corridor in Chandler, the Airpark area of north Scottsdale and a few other plays far from the center city, totally car-dependent. They, and Tempe, attract what business is being attracted. But the sum is far from competitive with other metros of Phoenix's size. And even aspirations, such as Phoenix's "Biomedical Corridor" is sold as a massive land-development scheme. All this at a time when peer cities are seeing historic downtown booms (more than restaurants).
The consequences to everything from a livable city fabric to environmental health and sustainability are profound. The power wielded by the Real Estate Industrial Complex is deeply destructive. And yet the old extraction business remains in the guise of "the growth machine." It doesn't pay for itself. We've known that for decades. It makes a few fortunes and sustains a ruling class while imposing huge costs on the commons, the taxpayers, the environment, and the future.
I can think of no other major city in America where real estate is the prime cause of the economy, rather than the result. But that's Phoenix, and the winners won't for a second entertain the steps necessary to cure the addiction.